Tuesday, November 27, 2012

Money Laundering - Why Britain is still the leading centre in the world for funny money laundering!

Last night, 26th November 2012, the BBC's 'Panorama' programme unveiled a truly shocking exposee, dealing with the way that company formation agents in the UK and in the Channel Islands, Dubai and Mauritius are busily setting up companies, both here and in the offshore sector with the express aim of allowing criminals to get round the money laundering legislation.

The programme used undercover reporters using hidden cameras, and they filmed the meetings and the conversations with the relevant entities.

The reporter first presented himself as a wealthy British resident tax-payer who had £6 million stashed in Switzerland, on which no tax had been paid, and on which he wanted to evade any other tax liabilities. For reasons of agreements between the UK HMRC and the Swiss authorities, he wanted the money moved urgently, into another secret facility.

He made an appointment with a firm of corporate servicing agents in York where he met one of the directors. He told him the story of the money and his wish not to pay any tax on it, so the company director was in no doubt that the putative client wished to engage in a piece of unashamed tax fraud.

He was offered a solution involving what was described as a scenario involving a secretive offshore tax haven, a series of companies and trusts and a Foundation in Belize. He was told that the structure would not enable any trace to be made back to the beneficial owner, and that the formation company were already operating up to 10,000 such similar structures already. He was told that in no HMRC investigations have the investigators been able to get to the money.

Jonathan Fisher QC was shown the structure which he then described as containing a number of serious criminal offences.

The programme went on the identify other corporate providers, in Dubai and later in Mauritius. The stories differed, one case involved a purported intermediary wanting to create a secret banking facility for his clients who were described as wealthy Indians who wanted a safe place to stash their commissions they were being paid for ensuring that relevant contract bidding projects went to the right bidders. For commissions, read 'bribes'. The undercover reported went to some lengths to spell out how these so-called 'commissions' worked, and it was made quite clear that they were clearly corrupt, and bribes.

Again, the help they were offered was immediate, constructive and 'for the right fee' potentially would have been very successful. Again, there was use made of offshore companies of various kinds. One of the jurisdictions fingered heavily was Guernsey, who would be making use of nominee directors to help disguise the beneficial ownership's of the corporate structures.

All in all, it was a very grubby tale of greed and as blatant a piece of criminal law-breaking as you could expect. In one scene, a corporate services provider proposed that he would invite a local bank officer to come to a meeting in his offices to meet the purported launderer, and complete the banking formalities. Easier than going to the bank, was how he put it.

What made it all so acutely depressing was that there was no evidence that HMRC had ever prosecuted any of the corporate services providers under their supervision, for any breaches of the Money laundering Regulations, or indeed for straight-forward money laundering itself.

This programme demonstrates the degree of contempt for the Money Laundering Rules and Regulations which exists in the corporate financing sector. The degree of blatant criminal complicity which is going on between potentially shady characters with weird stories, and dodgy cv's. (That's if anyone bothers to check)!

The real problem in all of this is that the Money Laundering Regulations have never been properly policed, and never effectively enforced. That is where the answer to money laundering interdiction lies, in the enforcement of the Regs, but why will no-one, absolutely fucking no-one, step up and take the lead on this?

I have written many times about the lack of willingness on the part of the FSA to take the lead. Their own enforcement arrangements are lack-luster and lukewarm at the best of times. They have consistently refused to accept their Parliamentary responsibilities to enforce the Money Laundering law within the financial sector. HMRC cover another sector, and other agencies have input, but absolutely nothing gets done, and eventually the industry realises that there is no point bothering with a compliance regime because no-one enforces it.

If company directors were getting criminal records for failing to comply with the Regs, there would have been a Gadarene-like rush to provide compliance systems and controls. It is so simple, but apparently so difficult.

I have been forced to come to the conclusion that Government does not really want the AML laws to be enforced - they cannot do so, because they spend such little time and effort insisting on enforcement. I am beginning to believe that they would rather turn a blind eye to the problem, coming up with weasel-worded statements when things get a bit warm about 'ensuring financial institutions have adequate systems and controls', but in practice, just keeping their noses out of the issue, for fear that too much regulation and compliance with international laws might mean putting off some of the slew of dirty money that is constantly flowing around the world looking for a safe haven, from coming to the UK.

I think that there may be a view that if we can't collect the bastard's taxes, then we might as well fill our coffers with the profits from the drug trade and other people's tax evasion, and as long as we pay lip-service to the FATF guidelines, and make sure that we don't get put on some nasty blacklist (which we won't because we make sure we are well-represented at FATF meetings), and as long as we keep pointing the finger of non-compliance at Iran or Pakistan or wherever, we will get away with it!

And all the while we play these silly games, we will have people like those named and shamed in the Panorama programme willing to take the risks to facilitate our ambitions..

What a reputation to have, but then, who really cares? It's only the rich and the big corporates who are fiddling while the financial infrastructure burns! And all the time the rich and the powerful are getting away with not paying their taxes, and pushing their bribes into offshore centres, and setting up their tax-avoision models, who is really losing?

You see, the rich don't use NHS hospitals, God, no! They use exclusive private health care facilities. They don't use public transport, when they have chauffers and big cars; they don't really come into contact with the police, they use private security instead; they send their offspring to private schools, so they don't bother the state education system, and they holiday away from the UK in the sun, so they don't really impact the state infrastructure at all.

As this gap between the haves and the have-nots grows, the rich will be less and less willing to part with their cash, and the kind of services that they are using to move their money around, away from the Chancellor's grasp, will become more and more important to them.

Chiseled over the portico of the IRS building in Washington are the words; 'Taxes are what we pay to live in a free society'! It is a fine statement and it has just as much resonance here in the UK as in the US, but as long as the government is going to be willing to continue to turn a blind eye to the lack of enforcement and what is really going on in the money laundering arena, it's validity is becoming increasingly debased.

When Leona Helmsley once said 'Only the little people pay taxes', I wonder if she really knew how accurate that statement was!

What gave the BBC Panorama programme such verisimilitude were the words uttered by a former detective who had long experience in the money laundering interdiction mechanism, when he said to the reporter, 'I can't believe how easy it was for you to find these people to provide these services.'That is the sad truth, it was all too easy!

2 comments:

The problem is even wider than illustrated by the reports of the programme (not shown here in NZ and I-Player is for UK only!). NZ and Ireland have a range of businesses owned and operated by CAs and Lawyers who do exactly the same and then our Finance Minister and PM (a one time forex dealer in Singapore and London with failed bank Merrill Lynch) claim NZ is NOT a tax haven nor does it encourage tax avoidance for foreign domiciled trusts. Give me a break! NZ is awash with trusts laundering dirty money and has been for years. As for Ireland we have come across professionals actively marketing schemes for Irish businesses and people to avoid tax using a range of loopholes the government is unwilling to close. The latter includes the opportunity to move tax domicile off-shore whilst remaining physically resident. Tens of thousands have done it - some known to me personally. In Ireland it has been 'normal' behaviour for decades. I recall one very well known individual arriving in Spain by private plane to pay for his new mansion with US$ bills at a time of exchange control. I know this because I witnessed the transaction in the bank. Tax has become optional for most wealthy people in Ireland and government is powerless to change it. What is needed now is not recrimination - that can come later. First we need a robust public debate and government prepared to clean out the institutionalised criminal culture that has developed. It is going to require revolutionary zeal and and I don't see it in any of the three big political parties in UK. The Finance Select Committee hearings were nothing more than political theatre with no more impact than Prime Minister's question time on a Tuesday. It is going to take civil unrest on a major scale to bring about change and I don't see any leaders emerging with the balls to challenge the establishment. However, my glass is half full and change is inevitable.

About Me

Having spent my career dealing with financial crime, both as a Met detective and as a legal consultant, I now spend my time working with financial institutions advising them on the best way to provide compliance with the plethora of conflicting regulations and laws designed to prevent and forestall money laundering - whatever that might be! This blog aims to provide a venue for discussion on these and aligned issues, because most of these subjects are so surrounded by disinformation and downright intellectual dishonesty, an alternative mouthpiece is predicated. Please share your views with what is published here from time to time!